Price fluctuations of ginger and green onions have limited impact and CPI will show a dynamic and stable trend
Macro trend
The current lower CPI price is a favorable time window for my country to stimulate domestic consumer demand.
Recently, the sharp rise in prices of individual agricultural products has aroused market concern.
In November, the national wholesale price of green onions was 4.56 yuan per kilo, up 99.1% year-on-year, and reached the highest level in the past four years.
However, in contrast to the prices of green onions and ginger, the latest data released by the National Bureau of Statistics showed that the CPI in November fell 0.5% year-on-year and 0.6% month-on-month.
It can be said that the CPI trend in November was significantly lower than expected. It was the first time since October 2009 that it fell to the negative growth zone, setting a new low in 11 years.
In addition, the November PPI also fell 1.5% year-on-year.
Over the past 11 years, the recurrence of negative growth in CPI has immediately attracted the attention of the market, and there has been a big discussion about whether there is a risk of deflation in my country.
In fact, the increase in the prices of individual agricultural products has limited impact on the daily consumption of Chinese residents.
Although the CPI "turned negative", there is no significant risk of deflation at present.
First of all, although agricultural products such as green onions and ginger are basic living products of residents, they are mainly daily supplements, so there is a certain elasticity of demand, especially there are substitutes such as onions and other spices. Therefore, short-term price increases have limited impact on residents’ basic living .
At the same time, the price of green onions has risen sharply recently, mainly due to the low green onion prices last year, which affected the enthusiasm of vegetable farmers in planting green onions, resulting in a reduction of about 30% in the national green onion planting area compared with the same period last year.
However, with the enhancement of the market mechanism's ability to allocate resources, this short-term price fluctuation impact can be repaired in time, and prices will gradually stabilize, so the prices of agricultural products such as green onions are within a controllable range.
Secondly, the CPI "turned negative" in November, the main influencing factors were a 2.0% drop in food prices and a 0.1% drop in non-food prices.
Among the food prices, the price of the C-ranked "Second Brother" fell by 12.5%, affecting the CPI by about 0.60%.
However, after deducting food and energy prices, the core CPI continued to remain stable, up 0.5% year-on-year, and the rate of increase has been the same for five consecutive months, reflecting the characteristics of stable CPI operations.
In November, non-food prices changed from flat in October to a decline of 0.1%, the first year-on-year negative growth in 11 years.
Non-food prices are showing a downward trend. Although it shows that my country’s residents are under-consumption, in fact, non-food prices are falling, and there are objective factors to follow, which fall within the normal economic price fluctuation range.
In particular, under the influence of the severe epidemic situation abroad and the spread of the epidemic in my country, the consumption of tourism-related industries in my country is insufficient, and the relevant prices in the industry chain are showing a downward trend.
Data show that in November, the prices of transportation and communications, housing, and clothing fell by 3.9%, 0.6% and 0.3% respectively.
It is believed that with the implementation of epidemic prevention and control measures and the continuous positive impact of good news about vaccines, the market will increase confidence in transportation, communications, and residential consumption, promote the gradual recovery of corresponding product prices, and reduce market concerns about the risk of CPI deflation.
Finally, my country’s current economy is basically gearing up.
The IMF predicts that the global economy will shrink by 4.4% in 2020, and the Chinese economy will grow by 1.9%. It is the only economy in the world's major economies that will achieve positive growth.
At present, my country's GDP has a certain degree of growth, which can effectively support the employment of residents, ensure the stable growth of residents' disposable income and the stability of consumption levels, and lay a solid foundation for the stability of the CPI trend.
Under the premise that the economy is basically well-oriented and residents’ employment and income are stable, as supply increases and prices fall, consumption levels will be boosted and prices will rise, until a dynamic balance between supply and consumption is achieved.
From this perspective, the current lower CPI price is a favorable time window for my country to stimulate domestic consumer demand, and it will help accelerate the construction of a new development pattern with domestic and international double cycles as the main body.
□Muding (financial commentator)